Guidance Note - General Business Insurers with Segregated Accounts and Separate Accounts

Summary

This BMA Guidance Note sets out the Authority's expectations for general business insurers that conduct business through Segregated Accounts (SACs, under the Segregated Accounts Companies Act 2000) or Separate Accounts (used by insurers incorporated under a private act). It covers both Limited Purpose and Commercial Insurer licence classes but excludes long-term insurers and Incorporated Segregated Account Companies/Insurers, which are addressed in a separate December 2020 guidance note.

• Governance: Boards of insurers using cell structures must oversee fitness and propriety of management, insurance managers and outsourced service providers, and maintain KYC, sanctions and AML/ATF controls for cell participants, sponsors and capital providers.
• Licensing: SAC Act companies intending to conduct insurance must register under the Insurance Act with comprehensive documentation (contracts, collateral agreements, funding flows, limited recourse language); missing details must be supplied before business commences.
• Funding and solvency: Cell funding must be of acceptable quality (cash, trust collateral, highly-rated reinsurance, approved contingent capital) and each cell must meet solvency requirements on a stand-alone basis, independent of the consolidated SAC capital position.
• Reporting: Insurers must include cell-level information in statutory financial statements via a new Schedule of Segregated Accounts forming part of the annual statutory filing, with an annual Principal Representative attestation on accuracy and collateral adequacy.
• Other areas covered: The Note also addresses declarations of compliance, Loss Reserve Specialist Opinions, restrictions on return of capital under section 31C of the Insurance Act, collateral quality/impairment disclosures, limited recourse, and notification of material changes in business.

The Guidance Note becomes effective on 1 January 2027 and applies to financial years commencing on or after that date, with the Authority indicating it will consider transitional arrangements during the first implementation year.

Key obligations

• Boards of insurers with cell structures must ensure compliance processes assess fitness and propriety of management, insurance managers and outsourced service providers.
• Boards must establish KYC, due diligence, sanctions compliance, suspicious activity reporting and AML/ATF controls for all cell participants, sponsors and capital/collateral providers.
• SAC Act companies intending to conduct insurance business must apply for registration under the Insurance Act, submitting comprehensive documentation including draft insurance contracts, collateral agreements and account owner agreements.
• Where cell business details are not available at licensing, the insurer must re-engage the Authority to provide updates before commencing the business activity in that cell.
• Insurers must obtain prior written approval before conducting business through the general account if licensed to write all business through cells, and for any change in business plan or licence condition requiring prior approval.
• Each cell must adhere to solvency requirements on a stand-alone basis and must not base underwriting, reserving or distribution decisions on the consolidated SAC capital position.
• Insurers must include each cell's information in statutory financial statements via the Schedule of Segregated Accounts as part of the annual statutory filing.
• The Principal Representative must complete and sign an annual attestation confirming the accuracy of the Schedule of Segregated Accounts and adequacy of collateral for each cell.
• For cells in deficit, a remediation plan must be provided to the auditors and kept current until the deficit is remediated.

Applies to

General business insurers using Segregated Accounts, General business insurers using Separate Accounts, Limited Purpose Insurers (Class 1, 2, 3), Commercial Insurers (Class 3A, 3B, 4), Insurer/Intermediate Insurance Group Businesses (IIGB), Special Purpose Insurers (SPI), Collateralised Insurers (CI)

Deadlines

• 1 January 2027: Effective date of the Guidance Note; applies to financial years commencing on or after this date.
• annually: Schedule of Segregated Accounts must be filed as part of the annual statutory filing, including the Principal Representative's signed attestation.

Related documents

• This document is made under Insurance Act 1978